On November 20, 2014 the Securities Division issued a Notice of Contemplated Action to BOSC, Inc. and Thomas Wayne Hayes. This was a result of a long-term, ongoing investigation into the alleged mismanagement and improper investments made by Bernalillo County Treasurer’s Office (“BCTO”). In summary, Tom Hayes (“Hayes”) and his employer BOSC, Inc. (dba Bank of Albuquerque) failed to ensure that investments made by BCTO were in line with the written investment policy and made recommendations that were not suitable. Hayes continued to sell bonds to the county based on yield with no concern of safety or liquidity. Hayes’s conduct went against BOSC’s policies and procedures. Further, BOSC failed to supervise Hayes and his sales practices and did not prevent or detect violations of suitability of recommendations. It is proposed that Hayes will be permanently barred from transacting business in New Mexico; BOSC will be suspended from conducting business in New Mexico as a broker-dealer until their supervisory system is adequate to prevent or detect violations; $10,000 fines will be assessed against BOSC and Hayes for each violation of the New Mexico Securities Act; BOSC and Hayes will each pay $10,000 towards the cost of the investigation.
On November 20, 2014 the Securities Division issued a Notice of Contemplated Action to Oppenheimer & Co., Inc. (“Oppenheimer”) and Royce O. Simpson (“Simpson”). This was a result of a long-term, ongoing investigation into the alleged mismanagement and improper investments made by Bernalillo County Treasurer’s Office (“BCTO”). Oppenheimer terminated Simpson in February 2014 during an internal review of the servicing of the BCTO account. In summary, Simpson was granted an unfair advantage over other broker-dealer agents in competing for BCTO’s business. Simpson and Oppenheimer failed to ensure that solicited investments offered to BCTO were suitable and in line with the written investment policy of the county. The county’s priorities were “safety, liquidity and yield.” Ultimately, BCTO had an overconcentration of long-term of Government Sponsored Enterprise bonds with 10 to 20 year maturities, leaving it at a greater risk for interest rate and liquidity risk. Neither Oppenheimer nor Simpson disclosed that the recommendations were not suitable. Oppenheimer’s supervisory system failed to reasonably detect or prevent violations. It is proposed that Simpson will be permanently barred from transacting business in New Mexico; Oppenheimer will be suspended from conducting business in New Mexico as a broker-dealer until their supervisory system is adequate to prevent or detect violations; $10,000 fines will be assessed against Oppenheimer and Simpson for each violation of the New Mexico Securities Act; Oppenheimer and Simpson will each pay $10,000 towards the cost of the investigation.
An examienation of an Albuquerque Investment Advisor revealed a lack of security for client’s non-public identifying information. Old client records were being stored in an open area in cardboard file boxes and non-locking file cabinets in an open kitchen/storage area. Advisor was instructed to store these items in locking file cabinets or a locked storage room to further ensure client’s private information.
A review of the books and records of an Albuquerque Investment Advisor revealed a lack of contract with clients. The firm primarily acts as a solicitor for third-party investment advisory firms. The firm would deliver the third-party agreements and have the clients sign, they did not have their own investment advisory agreement with the clients. The firm has since created an investment advisory contract that all clients are required to enter into t conduct business with the advisor.
An examination of a Santa Fe Investment Advisor determined that a solicitor was being paid an ongoing fee for client referrals and was not registered as an investment advisor. The registered investment advisor and the individual receiving the referral fees were sent notification of the apparent violation of 220.127.116.11 NMAC. In addition, there were no written policies and procedures, a violation of Rule 18.104.22.168A.(17) NMAC. This had been noted in a previous examination, but not corrected. The firm was charged the cost of the examination.
During the review of a Registered Investment Advisor’s trade blotter and fee invoices, it was discovered that the advisor was withdrawing surrender-free money from accounts for which a client was paying a percentage of assets under management and purchasing annuity add-ons for which a commission was earned for the same period, a violation of NMAC 12.11.7K(2). When the overbilling was detected, the client was contacted and the advisory fee was credited to the client.
Alan R. Wilson, the Division Director, after hearing, sustained the Division’s Cease & Desist issued to Jerome Beery (Respondent), a resident of Los Alamos. The Director found that between 2007-2013, Respondent sold unregistered promissory notes to multiple New Mexico residents and used money from investors to pay personal expenses and not for any legitimate investment purpose. The Director made a preliminary order that barred Respondent from raising capital in New Mexico. The Director also assessed a $5000 fine and $1000 in costs.
Final Order Beery
While reviewing the records of an Investment Advisory firm with multiple advisors, it was discovered that individual investment advisors were not disclosing their outside business activities. They also did not disclose personal bankruptcies as required. The team was operating without a designated supervisor that had passed the Series 24 or had a designation waiver. All disclosures were updated and the owner obtained his Series 24 within the time frame establish by the New Mexico Securities Division, no further action was required.
March 18, 2014
Albuquerque based investment advisers Equity Advisers, LLC, and Sidney Evans (Respondents) entered into a Consent Agreement after the Division’s investigation into Respondents’ sale of unregistered investment contracts that were tied to VA benefits and disability payments during 2011-2012. Respondents, who were fiduciaries to their clients, admitted the investment contracts were unregistered securities and that the investment contracts were not suitable investments for their elderly clients. As part of the Consent Agreement, Respondents surrendered their licenses to sell securities in New Mexico and agreed to pay to a $ 40,000 partially suspended fine. http://www.abqjournal.com/317509/biz/nm-orders-halt-to-investment-scheme-involving-veterans-benefits.html
January 14, 2014
New Mexico residents RJ Braught and Arthur E. Trujillo (Respondents) entered into a Consent Agreement after the Division’s concluded its investigation into Respondents’ sale of unregistered investment agreements that they used to raise money for a real estate development project in Angel Fire, NM, in 2008. The investments promised to double an investor’s money within a short period of time. The investment agreements also falsely stated that a national bank had approved funding for the project. Prior to the Consent Agreement, Respondents had made full or partial payment to a number of investors. Under the Consent Agreement, Respondents admitted that the investment agreements contained material misstatements. They also agreed to comply with the New Mexico Uniform Securities Act and to pay three investors a total of $52,000.
An examination of an Albuquerque Registered Investment Advisor showed the firm was operating with two advisors without the proper Series 24 licensed supervisor or professional designation waiver. The firm was given a deadline to sit for the Series 24 examination. The firm failed to do so on two separate occasions. One of the advisors had to voluntarily terminate from the firm through the IARD system. While the individual is still employed with the firm, they cannot give any investment advice to clients and now operates in an operational role.
During the examination of a SEC Investment Advisor firm who switched to state registration, the firm had an investment adviser representative who executed over 100 trades without being registered in New Mexico, in violation of the New Mexico Uniform Securities Act. The firm was fined $5,500 in civil and investigative costs and had to pay the $100 cost of the examination.
An Investment Advisor firm was recently examined after switching from SEC to state jurisdiction. The examination found the firm borrowed money and issued promissory notes to existing clients in violation of the New Mexico Uniform Securities Act. The firm was fined $7,500 and had to pay the $100 cost of the examination.